Crises, Contagion, and the Closed: End Country Fund Puzzle

Eduardo Levy Yeyati and Angel Ubide

No 1998/143, IMF Working Papers from International Monetary Fund

Abstract: This paper analyzes the behavior of closed-end country fund discounts, including evidence from the Mexican and East Asian crises. We find that the ratio of fund prices to their fundamental value increases dramatically during a crisis, an anomaly that we denote the “closed-end country fund puzzle.” Our results show that the puzzle relates directly to the fact that international investors are less (more) sensitive to changes in local (global) market conditions than domestic investors. This asymmetry implies that foreign participation in local markets can both help dampen a crisis in the originating country, and amplify the contagion to noncrisis countries.

Keywords: WP; exchange rate; financial crisis; share price; country funds; market index; Contagion; fund price; fund discount; closed-end country fund puzzle; growth fund; behavior of country fund prices vis-a-vis; fund market; discount variability; fund price index; country fund puzzle; country fund prices vis-a-vis; Stock markets; Emerging and frontier financial markets; Asset prices; Stocks; Asia and Pacific; Africa; Europe; Global (search for similar items in EconPapers)
Pages: 54
Date: 1998-09-01
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Citations: View citations in EconPapers (3)

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Journal Article: Crises, Contagion, and the Closed-End Country Fund Puzzle (2000)
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